What does the cut in interest rates mean to you?

Published: 15th August 2016

The Bank of England has lowered interest rates for the first time in more than seven years, reducing them to a historic low of just 0.25% from 0.5%.

Four lenders immediately promised to pass on the 0.25% cut in rates in full to all of their borrowers on variable rates, but there are other lenders who have not yet declared their hand.

The governor of the Bank of England, Mark Carney, said that “The banks have no excuse not to pass on this rate cut” and he advocated borrowers to shop around and move to another lender if their lender does not pass on the cut in full.

This should affect every variable rate mortgage. So if you are on a ‘base rate tracker’ mortgage, your lender’s ‘standard variable rate’, or any other form of variable rate mortgage, then you should hear from your lender within the month, telling you that the amount you pay on your mortgage each month will go down.

If you do not hear from your lender, or if they tell you that your mortgage is going down by less than 0.25% then you should get in touch with us as soon as possible so that we can review your mortgage and see if you are still on the lowest rate that you could be. With some mortgage rates down as low as almost 1%, there has never been a more affordable time to have a mortgage.

Of course, your rate will not drop if you are on a ‘fixed rate’ mortgage. In this case the amount you pay will be fixed usually for either two or five years, so you pay the same amount every month. Many people prefer the security of knowing what their monthly payments will be and these people will be unaffected by the drop in interest rates until their fixed rate period ends. In fact, it is still an incredibly good time to take out a fixed rate mortgage, as again, the rates on these are at a historic low at the moment and this will protect you from any rate rises that there may be a year or two down the line.

If you are unsure about what rate you are on, whether it is the best rate for you, or if you do not think your lender has passed on the rate cut to you when they should have done, then book an appointment to speak to one of our friendly and professional mortgage advisers. We will go through your mortgage with you and ensure that you are on the very best rate and mortgage type for your personal circumstances.